Some pension rules can have a significant impact on retirement but many people might be in the dark on vital information.
Being able to access your pension savings early can be a lifeline if you’re forced to retire early due to ill health. But more than half of Britons (57%) don’t know this is possible, a survey reveals.
An even higher number (63%) don’t realise that self-employed workers get tax relief for pension savings, the research from the Money and Pensions Service (MaPS) found.
Employees can continue to contribute to their pension while they are parental leave. Doing so can help ensure that neither parent faces a poorer retirement because they have taken time out of the workforce to have children. However, more than half of those surveyed (56%) didn’t know parents could do this. More women than men were unaware of the rule (61% versus 51%).
However, those surveyed were better informed about auto-enrolment. Some 78% know that they can start saving into a workplace pension as soon as they start work.
And 65% know that auto-enrolment does not guarantee that they will be saving enough for retirement.
Caroline Siarkiewicz, acting chief executive at the Money and Pensions Service, says: “It’s clear that many people are unaware of their options when it comes to important events in their lives that can impact their pensions such as becoming a parent or starting their own business.
“Women in particular have many important financial decisions to make when transitioning into parenthood, but our findings suggest they are less likely to be aware of their pension options.
“It is positive to see that people have an understanding of how automatic enrolment works. However, our findings suggest that many might be missing out on important information when making decisions affecting their pensions.”
Here’s how people in the MaPS study responded to various pension statements:
|Statement||True or false?||Right||Wrong|
|Self-employed people can't benefit from tax relief on pension savings||FALSE||37%||63%|
|If you are forced to retire early due to severe ill health, you can access your pension early||TRUE||43%||57%|
|Workers can not contribute to their pension while on parental leave||FALSE||44%||56%|
|Money invested in a pension tends to grow at the same rate as you would get in a savings account||FALSE||48%||52%|
|If you save into a workplace pension and your employer goes bust, you will lose all your money invested in the scheme||FALSE||51%||49%|
|There's no benefit to contributing more into a pension than the amount your employer will match||FALSE||60%||40%|
|If your employer automatically enrols you into a pension scheme, you don't have to worry about not saving enough||FALSE||65%||35%|
|You can leave money to grow in pension schemes until you need to access it||TRUE||67%||33%|
|People can start saving into a pension as soon as they have started working, whatever their age||TRUE||78%||22%|
Source: Money and Pensions Service, October 2019
The Money and Pensions Service (MaPS) was set up to combine the various government bodies that dispense help and information to the public about financial matters and was formed out of the Money Advice Service, Pension Wise and the Pensions Advisory Service.Source: Money and Pensions Service, October 2019
Ms Siarkiewicz adds: “You can speak to a pensions specialist for free, [and get] confidential help by contacting the Pensions Advisory Service helpline or webchat.”
MaPS offers the following top tips to avoid pension blind spots:
- Continue to make contributions to your pension while on parental leave. Check with your employer how this will work. This will vary depending on whether you’re part of a defined contribution scheme or defined benefit scheme.
- If you’re suffering from severe ill health and wondering what your options are to access your pension, talk to your pension provider. They will be able to explain whether you are eligible to access your pension early
- If you are self-employed, you could receive tax relief on the amounts that you put into your pension so it’s worth making contributions if you can. Further support for self-employed people with their pensions is available through the Pensions Advisory Service which offers a specialist telephone-based appointment service.
- For free, confidential help from pensions specialists call The Pensions Advisory Service helpline on 0800 011 3797, or visit www.pensionsadvisoryservice.org.uk
- This article was first written by our sister magazine Moneywise.